Protecting Your Kids' Inheritance From Their Creditors

If one or more of your children have accumulated a lot of debt, you might hesitate to give property to those kids in your estate plan. The property might well end up in the hand’s of a child’s creditors, so many people think it better to give the property to another family member. However, you can leave assets to an indebted child without fear that creditors will get it all.

A spendthrift trust is specifically designed for this type of situation. You can fund the trust with the money and property you would have otherwise given the child outright. A third-party trustee is appointed to exercise control over the assets in the trust and how they are disbursed to the child. The indebted child only receives the money he or she needs and only when it is needed. If the child has no control over the trust assets, then creditors cannot reach those assets, even if the child is the sole beneficiary of the trust.

Talk to an experienced and qualified estate planning attorney about protecting your estate from your children’s creditors and whether a spendthrift Trust is appropriate for your situation.

Timothy P. Murphy is an estate planning and elder law attorney whose practice emphasizes helping people to build, preserve and pass on their wealth. He works with his clients to accomplish their goals while avoiding unnecessary court proceedings and minimizing or eliminating exposure to death taxes.

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